What Happens To Your Credit Card Debt If You Die Suddenly?

Credit card debt doesn’t go away once you die. On the contrary, it is paid off using estate assets or it is managed by the joint account holder or cosigner. While your heirs can inherit other assets, they are not legally responsible for your credit card debts. However, the creditor might still contact them and ask them to pay off any outstanding debts.

Even then, the debts do not simply vanish. Instead, the debt burden gets transferred to the estate of the deceased. After death, the dead person’s estate gets established, and the court appoints an administrator to manage the finances of the deceased, including his debts.

Adhil Shetty, CEO, BankBazaar said, “When a person dies, everything they owned becomes a part of their “estate”. This includes property, investments, jewellery, cash, and any other investments. Any debt they owe, including credit card outstanding, is paid out of the assets from their estate. It is the responsibility of the administrator of the estate to clear all outstanding debts. Unless they are joint card holders, there are no legal provisions that hold the surviving spouse, parents, or children responsible for clearing credit card debts.”

Also, as soon as a person dies, a family member must quickly pass on all relevant financial details of the death to the bank to prevent identity theft. You might have to provide a death certificate to the credit card company as proof. One must do this quickly as soon as possible after the death of the individual. 

Credit card loans are treated similarly to other outstanding dues on credit cards. “Credit card debts, being unsecured debts, will be among the last to be cleared. The debts are to be paid out of the borrower’s estate. If the borrower’s estate is insolvent, i.e., the debts are more than the value of the estate or if the estate itself is too small to cover debts, then the lender will have to write off the debt,” Renu Maheshwari, chief executive officer, and principal advisor, Finzscholarz Wealth Manager, and a Sebi-registered investment advisor said. 

Note that only the person in whose name the card has been issued has been authorized to use that credit line by the card issuer. Anyone else using that credit line without authorization of the issuer can be considered fraud and may invite legal penalties.

If the deceased person had a joint credit card with his spouse, one must negotiate a suitable payment term with the credit card company according to the circumstances. 

It helps if the deceased person has credit card insurance that covers outstanding balances. It would help in repaying the debt. However, it’s important to verify the coverage and terms of the insurance policy with the credit card issuer.